Indian IT services market to touch $10 Bn

By SiliconIndia   |   Wednesday, 23 January 2008, 13:15 Hrs
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Bangalore: According to Gartner, a global IT research and advisory company, the Indian IT services market is set to grow to $10.73 billion by 2011, at a five-year compounded annual growth rate (CAGR) of 23.2 percent. Gartner said that factors driving this growth are agility, growth, cost takeout and innovation.

The continuous turnover rates of key IT staff in the range of 15 to 20 percent is considered a prime impetus for companies to consider external service providers (ESPs).

"The primary drivers of the IT services market growth are economic growth, highly customer centric strategies, high growth among the small and mid-size businesses (SMBs) and government projects. Realizing this, many IT service providers, multinational (MNCs) and domestic companies have now developed strategies exclusively for the domestic market," said Arup Roy, senior research analyst, Gartner. "With a view to capture the growing opportunities, many IT organizations are planning to spin off themselves into independent entities," he added.

The market segments that are expected to witness the strongest growth are consulting, IT management and business process management (BPM) services with five year CAGRs of 28.1, 23.8 and 27.1 percent, respectively.

While consulting revenue grew by 30.1 percent to $340 million in 2006 compared with 2005, IT management revenue grew by 27.3 percent from 2005 to $549 million in 2006. As companies become more mature in their overall approach towards IT, they invariably have to rely on external providers to help them with consulting services. Increased adoption of remote infrastructure management services has driven the development of network operation centers / security operation centers, remote management centers and other managed service offerings from ESPs.

And also, the primary challenges that are driving organizations to engage business process outsourcing (BPO) are cost, growth and business innovation. The primary objectives of BPO engagements are productivity improvements, process / business transformation, and cost-containment to improve profits.

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